2024 (12) TMI 1569 - AT - Income Tax

Estimation of income - bogus purchases - HELD THAT - Commissioner has affirmed the addition @ 12.5% of the bogus purchases and the Assessee is engaged in the business of ferrous articles and there are various judgments by the Jurisdictional Tribunal wherein the addition @5% in the identical trade has been upheld therefore in the considered opinion of this Court it would be appropriate to restrict the addition being the gross profit @ 5% of the alleged bogus purchases instead of 12.5% as made by AO and affirmed by Commissioner. Thus the AO is directed to verify whether the purchases made by the Assessee as alleged bogus purchases have already been subjected to profit loss account and on finding answer Yes then to re-compute the income of the Assessee by considering the GP @ 5% in lieu of 12.5% over and above the GP already shown by the Assessee. Otherwise the addition as affirmed by the Ld. Commissioner would sustain. Appeal filed by the Assessee is partly allowed.

Summary

The Appellate Tribunal (ITAT Mumbai), per Judicial Member Shri Narender Kumar Choudhry, heard the Assessee's appeal against the order dated 07.05.2024 passed by the National Faceless Appeal Center/Ld. Commissioner of Income Tax (Appeals) under section 250 of the Income Tax Act, 1961, for A.Y. 2009-10. The issue concerned addition on alleged bogus purchases at 12.5% of the value, affirmed by the Commissioner.Noting that the Assessee is engaged in the business of ferrous articles and referencing precedent from the Jurisdictional Tribunal upholding a 5% addition in identical trade cases, the Tribunal held it appropriate to restrict the addition to "gross profit @ 5% of the alleged bogus purchases" instead of 12.5%. The AO was directed to verify "whether the purchases made by the Assessee as alleged bogus purchases, have already been subjected to profit & loss account." If yes, income is to be recomputed considering GP @ 5% in lieu of 12.5%, over and above the GP shown by the Assessee; otherwise, the addition at 12.5% stands.The appeal was thus partly allowed.